Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*New IPO Disappoints Right Out Of Gate: Waterdrop (WDH.US) [Waterdrop] provides an online insurance marketplace and related medical crowdfunding platform in mainland China. Waterdrop  reported its first set of earnings results since its IPO, coming in at a negative CNY 370.2 bn for 1Q21, declining CNY 249.4 (206.6%) YOY largely given its higher costs from a channel (third party traffic) and product mix shift to long-term insurance. Both factors have caused operating costs to increase CNY 579.1 bn (75.7%) YOY  - far outpacing revenue growth of CNY 229.6 bn (35.1%) over the period; and  *All Is Not Lost…Yet: First year premium (FYP) did increase 42.7% YOY – led by costly third party FYP which increased 51.6%. Long-term critical illness insurance grew 132% off of a low base, but still well exceeding industry average. Anecdotally, management believes that competitive pressures appear to be abating and that increases in customer acquisition costs is now decelerating. In addition, Waterdrop continues to make progress with: Waterdrop Health; Waterdrop Medicine; and with outpatient services.

*New IPO Disappoints Right Out Of Gate: Waterdrop (WDH.US) [Waterdrop] provides an online insurance marketplace and related medical crowdfunding platform in mainland China. Waterdrop  reported its first set of earnings results since its IPO, coming in at a negative CNY 370.2 bn for 1Q21, declining CNY 249.4 (206.6%) YOY largely given its higher costs from a channel (third party traffic) and product mix shift to long-term insurance. Both factors have caused operating costs to increase CNY 579.1 bn (75.7%) YOY  - far outpacing revenue growth of CNY 229.6 bn (35.1%) over the period; and  *All Is Not Lost…Yet: First year premium (FYP) did increase 42.7% YOY – led by costly third party FYP which increased 51.6%. Long-term critical illness insurance grew 132% off of a low base, but still well exceeding industry average. Anecdotally, management believes that competitive pressures appear to be abating and that increases in customer acquisition costs is now decelerating. In addition, Waterdrop continues to make progress with: Waterdrop Health; Waterdrop Medicine; and with outpatient services.

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Central China Management / Equity Capital Markets

<div><a href="https://www.smartkarma.com/entities/central-china-management-company-limited" target="_blank" data-smartkarma-citation="entities:33328:1" rel="noopener">Central China Management Company Limited (9982 HK)</a> (CCM) raised US$127m at HK$3 per share, close to the top end of its price range.</div><div>Central China Management (CCM) is a project management company for property development projects in China. The company manages property management projects on behalf of Project Owners throughout the entire property development process.</div><div>
In this note, we will discuss deal dynamics and update valuation. 
We covered the IPO earlier in:
<ul><li>
<a href="https://www.smartkarma.com/insights/central-china-management-ipo-concentrated-exposure" target="_blank" data-smartkarma-citation="insights:51692" rel="noopener">Central China Management (中原建业) IPO - Concentrated Exposure</a> </li></ul>
</div>

Central China Management Company Limited (9982 HK) (CCM) raised US$127m at HK$3 per share, close to the top end of its price range.Central China Management (CCM) is a project management company for property development projects in China. The company manages property management projects on behalf of Project Owners throughout the entire property development process.
In this note, we will discuss deal dynamics and update valuation. 
We covered the IPO earlier in:

Central China Management (中原建业) IPO - Concentrated Exposure 


Central China Management (中原建业) IPO Trading - Weak Demand

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Sichuan Languang Justbon Service Group / Event-Driven

<a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> has despatched the composite document in relation to <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> and <a href="https://www.smartkarma.com/entities/harbin-electric-co-ltd-h" target="_blank" data-smartkarma-citation="entities:11116:1" rel="noopener">Harbin Electric Co Ltd H (1133 HK)</a> have previously failed due to the inability to meet the 90% minimum acceptance condition.  <div class="content-highlight">Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.</div>

Sichuan Languang Justbon Service Group (2606 HK) has despatched the composite document in relation to Country Garden Services Holdings (6098 HK) base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for Beijing Jingneng Clean Energy (579 HK) and Harbin Electric Co Ltd H (1133 HK) have previously failed due to the inability to meet the 90% minimum acceptance condition.  Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

People's Insurance (PICC) / Equity Bottom-Up

*Improving Profitability: PICC Group (1339.HK) [People’s] reported 1Q21 net profit after tax of CNY 10.0 bn, increasing by a whopping CNY 8.7 bn mn (6.7x) on a linked quarter basis. The linked quarter improvement can be attributed both to the PICC Life and PICC P&amp;C (2328.HK) whose bottom-line’s improved CNY 4.4 bn (vs a loss of CNY 1.8 bn in 4Q20) and CNY 3.8 bn (156.3%) - accounting for 61% and 27% of the group's earnings;  and *PICC P&amp;C Posts Big Expense Improvement: PICC P&amp;C (2328.HK) reported a 1Q21 net profit of CNY 8.9 bn, increasing 156.3% linked quarter. The overall combined ratio declined from 101.3% in 4Q20 to 95.7%. Compositionally, the overall expense ratio decreased 650 bp linked quarter to 25.4%, while the loss ratio increased 90 bp to 70.3%, reflecting a change in auto insurer’s cost structure after implementing pricing reforms.

*Improving Profitability: PICC Group (1339.HK) [People’s] reported 1Q21 net profit after tax of CNY 10.0 bn, increasing by a whopping CNY 8.7 bn mn (6.7x) on a linked quarter basis. The linked quarter improvement can be attributed both to the PICC Life and PICC P&amp;C (2328.HK) whose bottom-line’s improved CNY 4.4 bn (vs a loss of CNY 1.8 bn in 4Q20) and CNY 3.8 bn (156.3%) - accounting for 61% and 27% of the group's earnings;  and *PICC P&amp;C Posts Big Expense Improvement: PICC P&amp;C (2328.HK) reported a 1Q21 net profit of CNY 8.9 bn, increasing 156.3% linked quarter. The overall combined ratio declined from 101.3% in 4Q20 to 95.7%. Compositionally, the overall expense ratio decreased 650 bp linked quarter to 25.4%, while the loss ratio increased 90 bp to 70.3%, reflecting a change in auto insurer’s cost structure after implementing pricing reforms. 

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Last Week in Event SPACE:  Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

China

Central China New Life Limited engages in provision of property management services and related value-added services. The Company offers property management and related value-added services, lifestyle services, commercial property management and consultation services, and more. Central China New Life mainly conducts its businesses in China market.

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Central China New Life (9983 HK)

Waterdrop – Water Fall

WATERDROP: Waterdrop reported its first set of earnings results since its IPO, declining 206.6% YOY largely due to higher costs from a channel and...

Thomas J. Monaco

Central China Management (中原建业) IPO Trading - Weak Demand

Central China Management Company Limited (9982 HK) (CCM) raised US$127m at HK$3 per share, close to the top end of its price range

Zhen Zhou, Toh

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Satisfaction of the minimum acceptance condition is the key hurdle. At the last close, the gross spread to the enhanced offer price of HK$54.3000...

Arun George

PICC Group – Big Print

PICC GROUP: PICC reported QOQ 1Q21 net profit growth of 6.7x, attributed both to the PICC Life and PICC P&C (2328.HK) whose bottom-line’s each...

Thomas J. Monaco

Last Week in Event SPACE: Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

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